Capital Gains Tax Changes in the 2024 UK Budget: Implications for Small Businesses and Investors

The 2024 UK Budget has introduced significant changes to capital gains tax (CGT) rates and thresholds, directly affecting small business owners, property investors, and individuals selling high-value assets. These changes signal the government’s focus on addressing fiscal gaps while encouraging strategic planning among taxpayers.

Key Capital Gains Tax Changes:

1. Increased CGT Rates:
   • The lower CGT rate has risen from 10% to 18%, impacting basic rate taxpayers.
   • The higher CGT rate has increased from 20% to 24%, affecting higher and additional rate taxpayers.
   • Gains on residential property sales, however, remain taxed at 18% (basic rate) and 28% (higher rate), unchanged from previous years.
2. Business Asset Disposal Relief (BADR):
   The tax rate for disposals qualifying under BADR has increased from 10% to 14% on the first £1 million of gains. This rate is set to align with the lower CGT rate of 18% from April 2026. Entrepreneurs planning to sell their businesses may need to reassess their tax liabilities under these revised rates.
3. Annual Exempt Amount (AEA):
   The CGT annual tax-free allowance, which was reduced to £3,000 in the previous budget, remains unchanged. This reduction significantly limits the tax-free gains available to individual investors and small business owners.

Impact on Small Businesses and Investors

For Small Business Owners:
The changes to BADR and increased CGT rates present challenges for entrepreneurs looking to exit their businesses or transfer ownership. Strategic planning, such as timing the sale of business assets or leveraging other reliefs, will be crucial to managing higher tax bills.

For Property Owners and Investors:
Higher CGT rates on non-residential assets, coupled with the unchanged rates on residential property, may affect the profitability of selling investment properties or liquidating other capital assets. Property investors will need to assess the timing of sales to optimise their tax position.

For High-Net-Worth Individuals:
Those managing diversified portfolios with significant gains from shares, collectibles, or other investments will face a higher CGT burden. Cross-border investors with UK assets should also take note of compliance requirements under these updated rules.

Why GSC Solicitors Can Help

Navigating the complexities of the CGT regime requires a tailored approach to tax planning. Our Corporate & Private Client teams specialise in:

• Advising small business owners on optimising their tax position during business disposals.
• Structuring property portfolios to mitigate CGT liabilities.
• Providing bespoke advice for high-net-worth individuals with cross-border assets.

Contact us today to ensure your financial strategy aligns with the latest tax regulations.